E-procurement will continue to enjoy exponential growth because of the huge cost savings it delivers, but implementers have to realise that success takes more than just having dotcom after their name.
Such is the view of David Bickerstaff, director of e-business and supply chain solutions at PeopleSoft Australia. Speaking at the third annual CIO Magazine Conference yesterday, Bickerstaff emphasised the need for e-procurement designers to highlight the user needs included in such systems.
"The New Economy is not just about putting 'dotcom' after your name" he said. "It's about connecting people and systems."
Bickerstaff suggested that successful e-procurement systems must integrate the needs of users with efficient and well-engineered information technology. Automating and optimising the supply chain, he said, was the best for all participants in the process.
In his presentation, Bickerstaff cited analysts' predictions that by 2004, $7 trillion in B2B transactions would be moving over the internet, and that will only represent 7 per cent of the total B2B transactions.
There is no doubt that e-procurement can mean substantial cost savings. Bickerstaff offered a typical manufacturing example, where indirect costs -- maintenance, repair and operating supplies -- consumed a third of a company's revenues. (In white-collar businesses, the percentage is much higher.)Improvements in e-procurement -- lower cost of goods, faster cycle times, cheaper transactions and lower inventory -- resulted in a 3 per cent reduction of indirect costs, which translated to a 50 per cent increase in ultimate profit.
He quoted a recent Gartner example, in which an organisation with a half-billion-dollar annual turnover saved 5 per cent on its inventory costs, and added several million dollars to the bottom line by implementing e-procurement.
Bickerstaff acknowledged that there are many ways these savings can be realised, but nominated the "marketplace model" as one example.
"It's fair to say that e-marketplaces are being recognised as a dominant model for B2B e-procurement over the earlier point-to-point solutions" he said. "In particular, we've seen the emergence of trading communities in the automobile, retailing, apparel, health and pharmaceutical industries.
"These are based on ideas that have been around for thousands of years. Man's first marketplaces had the same elements as e-marketplaces: buyers, sellers, content and aggregation. By aggregating catalogues into communities -- in this case, procurement communities -- you can have multiple suppliers and multiple buying organisations accessing the same outsourced catalogues. This allows standardisation and categorising, so you can get a good cross-section of the goods you're looking for."
Bickerstaff pointed out that the benefits of e-procurement efficiency could and should be spread along the supply chain to create a win-win situation.